5 Biggest Issues Faced by First Time Entrepreneurs When Starting a Business
Over the past year I have been the founder of Problemio, which is the company behind some of the most helpful mobile apps for planning and starting a business on iOS, Android, Kindle and the NOOK. Since I started creating the apps, they have had a cumulative download total of 150,000. Since the app offers chat-based help to entrepreneurs, I was able to chat with many entrepreneurs on my apps and learned that there are five very common areas where most people encounter the biggest challenges. In this article I will go over those challenges and suggest some solutions or workarounds.
1) Business idea issues
It takes experience to be able to tell whether a business idea is good or not. It also takes some reasoning about what it means for a business idea to be good. For example, building a Google search engine was a good idea in the 1990s, but 99.99% of the population could not execute that idea to the level of quality that would have been required. Similarly, opening a restaurant may be a good business idea for some people, but not for most. So a business idea has to be highly personalized to the entrepreneur to take advantage of their abilities, interests, passions, education, access to capital, connections, and much more.
Quite often, first time entrepreneurs also make the mistake of trying to go too big with the idea right away. Some of the common business idea mistakes are to try to open more than one business at once, or try to open a business that would require millions of dollars when they only have access to a few thousand dollars with which they can realistically start. It is good to have ambition, but some small wins are needed in order to build on them and go bigger.
The business idea topic is quite broad and I have a number of business ideas articles on the Problemio website.
Editor's Note: Another option entrepreneurs and new business owners should consider is Solo Build It!. Included in the Solo Build It! product is a tool that you can use to research your business focus and really determine what niche makes the most sense for you.
2) Lack of finances
Nearly every entrepreneur, including myself, has faced this issue at some point. While some businesses can be bootstrapped (operated without a cash injection), most businesses will need a cash injection of some sort to help it get the resources it needs.
In the technology space, people often overfocus on investors. But investors are not the only option. In addition to possibly getting an investment, people can try to get donations via crowdfunding or various fundraisers, loans, or grants. You can also consider using a funding company like Universal Funding to increase your cash flow.
If cash flow is a critical concern, invoice factoring can help speed up the accounts receivable process for some business operators. Read up on TBS Capital Funding's solutions for more info.
The topic of raising money is complex. There are a number of articles devoted to this topic of fundraising ideas on the Problemio website to explore the options you have to raise money.
3) Inability to market their business
Another common difficulty people face is not having a great idea of how to market and promote their business. Too often people's idea of a marketing strategy is to post about their business on Facebook, hand out flyers and business cards. While those things are ok to do, a marketing strategy must absolutely be much more refined, savvy, and cover many more options.
Each business needs to have a marketing plan that suits the uniqueness of that business and speaks to the target customer for that business. The topics of understanding your target consumer and creating a marketing strategy that best suits your business are more fully covered within the Marketing, Social Media and Blogging categories here on The Social Media Hat.
4) Not knowing how to plan the business
Business planning has been getting negative attention in the technology space in recent years, and I do not advise people to write a formal business plan unless that is a requirement by someone or some institution. The true value of business planning is to identify the challenges and pitfalls and plan around them before they happen, rather than getting blindsided by them when the business has already been set in motion.
In other words, business planning is a way to view the business in a holistic way to help you align the vision for the product that delights the identified target audience, goes after a big-enough market with an effective-enough strategy to earn revenue and turn a profit.
5) Legal questions
Lastly, most entrepreneurs struggle with understanding three key legal themes:
- How they should structure the business when incorporating.
- The licences and permits required by their city, county, state and country.
- The level of protection needed for the business in terms of patents, copyrights and trademarks.
To understand how to incorporate the business, people can either read up on it, or have everything explained in about an hour by an attorney. Lawyers can generally point you in the correct direction in terms of the type of taxation and liability protection issues that are best suited for your business.
To find out the licensing and permit requirements, it can be as simple as calling the city, county and your local Secretary of State office.
Lastly, deciding on the patents, trademarks and other protection mechanisms for your business is one of the biggest legal gray areas faced by entrepreneurs. Lawyers tend to be conservative on this issue and recommend fuller protection. Ultimately, most people never need patents, so it is up to the entrepreneur to make the final decisions on how and what to protect within their business.
Have you faced some of these challenges yourself, or were there others that proved to be even larger obstacles to your new business? Please leave your comments and questions below.
Entrepreneurs Sir Richard Branson and Ryan Holmes image courtesy of UK in Canada, Flickr.